Robinhood Markets, Inc. HOOD shares have surged 30% since the beginning of this month and touched a 52-week high of $30.63 during Friday’s trading session. Over the past three months, the stock has surged 64.7%, outperforming the industry, the S&P 500 Index and its close peers — The Charles Schwab Corporation SCHW and LPL Financial Holdings Inc. LPLA.

Three-Month Price Performance

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Does HOOD stock have more upside left despite hitting a 52-week high? Let’s try to decipher that.

Factors Likely to Drive Robinhood Stock Higher

Presidential Election Results to Aid Revenues: On Nov. 5, U.S. presidential elections were held, resulting in a victory for Donald Trump. Given the favorable stance of the new regime toward cryptocurrencies, Bitcoin rose to an all-time high.

This will aid Robinhood’s cryptocurrency revenues as new investors will be attracted to the cryptocurrencies to boost their returns and leverage the benefit of diversification as an asset class as well. During the first nine months of 2024, the company’s cryptocurrency revenues were $268 million, constituting 13.8% of total net revenues. Over four years (2019-2023), the metric witnessed a 94.2% compound annual growth rate (CAGR).

Transaction-Based Revenues Components

Image Source: Robinhood Markets Inc.

The expansionary stance of the President-elect fueled the equity markets rally, with the S&P 500 index hitting an all-time high and crossing the 6,000 mark for the first time on Friday. This is expected to further contribute to the increase in Robinhood’s transaction-based revenues, driven by higher equity market participation.

Robinhood’s total net revenues have witnessed a CAGR of 61% over the last four years (2019-2023). Transaction-based revenues witnessed a 46.4% CAGR over the same period. Given the company’s focus on transaction-based revenues combined with its commission-free model and supportive outlook of the incoming administration, its revenues are likely to move higher.

Total Revenue Segregation

Image Source: Robinhood Markets Inc.

Business Diversification Efforts: Robinhood became extremely popular among younger generations riding on the meme stock wave in early 2021. Nonetheless, since its IPO in July 2021, the company has taken several steps to evolve from merely being a brokerage firm to a more mature and diversified entity by expanding into retirement and credit card accounts.
 
In July 2024, Robinhood acquired Pluto Capital Inc. With the integration of Pluto’s advanced capabilities, the company is set to revolutionize the investment experience for its users.
 
In sync with this, the company announced plans to acquire Bitstamp in June 2024. Bitstamp's core spot exchange, which features more than 85 tradable assets, coupled with its popularity in Europe and Asia, will significantly enhance Robinhood’s crypto offerings.

Additionally, the company launched its trading app in the U.K. and its first-ever credit card this March. Last month, HOOD announced plans to expand its cryptocurrency offerings by introducing futures trading for Bitcoin and Ether.  Further, it plans to introduce UK Stock investing to British users.

HOOD Rewards Shareholders: In May, Robinhood announced a share buyback plan. The company’s board of directors approved a share repurchase program, authorizing it to buy back up to $1 billion of its outstanding common stock.

While the plan doesn’t have an expiration date, the company expects to buy back shares within two to three years. As of Sept. 30, 2024, roughly $903 million worth of authorization remained available for repurchase.

Robinhood is on solid ground, with significant cash reserves. As of Sept. 30, 2024, it reported cash and cash equivalents of $4.6 billion.

Cash & Investments Sequential Trend

Image Source: Robinhood Markets Inc.

Regulatory Headwinds

Robinhood's push into the global crypto market comes amid ongoing regulatory challenges in the United States. This September, the company agreed to pay $3.9 million as a settlement with the California Department of Justice over crypto withdrawals. It was alleged that the company prevented its customers from withdrawing cryptocurrency from their accounts between 2018 and 2022.

Additionally, in May 2024, the company received a Wells notice from the U.S. Securities and Exchange Commission concerning the tokens traded on its platform, reflecting the complex regulatory landscape for crypto firms.

The notice came because of the alleged violation of registrations as a securities broker and transfer agent.

Likewise, this July, LPLA’s unit was sued by Ameriprise Financial for malpractice and mishandling of private and confidential client data and recruiting advisors while violating legal, regulatory and industry obligations.

Bearish Analyst Sentiments

Over the past month, the Zacks Consensus Estimate for earnings of 71 cents and 78 cents per share for 2024 and 2025, respectively, moved 6.6% and 4.9% downward. Nonetheless, the projected figures imply growth of 216.4% for 2024 and 9.9% for 2025.

Estimate Revision Trend

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On the other hand, the Zacks Consensus Estimate for SCHW’s 2024 and 2025 earnings has moved 1.3% and 1.1% upward, respectively, over the past month.

Parting Thoughts on HOOD Stock

Robinhood’s solid revenue growth, organic and inorganic growth efforts to diversify the business, and strong balance sheet will aid the company’s financials. Moreover, the newly elected governmental regime will further reinforce the company’s efforts to improve its top line through product diversification. However, the company’s regulatory headwinds and rising operating expenses amid growth initiatives are major concerns.

Thus, HOOD stock remains a cautious bet for investors now. Those who already own it can hold it for now.

HOOD currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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